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What’s Driving 21st Century Fox’s Filmed Segment?

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Fiscal 1Q18 key drivers

Twenty-First Century Fox’s (FOXA) (or Fox’s) Filmed Entertainment segment, which makes up 31% of Fox’s total revenue, reported a 2.9% YoY (year-over-year) growth in revenue. The increase in revenue was mainly fueled by the licensing of its animated TV series Futurama and its strong home entertainment business.

From the graph above, we can see the growth of Fox’s Filmed Entertainment segment in the last five quarters. It grew at a CAGR (compound annual growth rate) of 0.7% during that period. However, in 1Q18, the segment posted the second-lowest revenue compared with the last five quarters.

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In 1Q18, the Filmed Entertainment business was mainly driven by hit movie releases, including War for the Planet of the Apes and Kingsman: The Golden Circle. Both films brought in more than $400 million at the global box office. Kingsman: The Golden Circle was released at the end of 1Q18, so the next quarter will gain from the carryover revenue.

Even Fox’s Home Entertainment unit contributed to the Filmed Entertainment segment’s revenue growth in the reported quarter, buoyed by hit title releases The Boss Baby and Alien: Covenant.

Future drivers

Fox’s movie business could benefit from its newly released movie Ferdinand (animated) and The Greatest Showman. Both brought in more than $150 million at the global box office.

The company has a strong pipeline for the second half of fiscal 2018. Blockbuster movie franchises such as Deadpool 2 and X-Men: Dark Phoenix are expected to be released in that period. The launch of hit films coupled with licensing deals and popular title launches from its Home Entertainment division could boost its Filmed Entertainment segment.

According to Box Office Mojo, Disney (DIS) dominated the 2017 domestic box market with 21.8% market share, followed by Warner Bros. (TWX), Universal (CMCSA), and Twenty-First Century Fox (FOXA) with market shares of 18.4%, 13.8%, and 12%, respectively.

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